Hey Google, Tell Me How to Make Bay Area Housing More Affordable

Northern California's gravity-defying tech boom continues to soar. And it's not getting any easier to keep a roof over your head. As Curbed reported on June 14th:

If Google wants to build its mammoth new campus in downtown San Jose, the tech giant needs to commit to building more than 17,700 new homes in the area, including more than 5,200 units priced at below market rates to keep rents at current levels. At least, that’s the argument by labor group Working Partnerships USA.

 Not a week later, Google made a big announcement. As reported by NPR:

Google is committing $1 billion to try to provide more affordable housing in the San Francisco Bay Area.... Google says the money should result in 20,000 new homes added to the local market, over 10 years.

[T]he company will "repurpose at least $750 million of Google's land, most of which is currently zoned for office or commercial space, as residential housing." That move should result in 15,000 new homes at all income levels, including for low- and middle-income prospective homebuyers, the Google CEO said. In the second part of the plan, Google will create a $250 million investment fund that will be used to give developers incentives to build at least 5,000 affordable housing units.

Multihousing Pro magazine reports that Google is leasing, not donating, the land. Describing this as a $1 billion "commitment" feels a bit fishy in that case—though the prospect remains that it could lease it to developers at well under market rate, I suppose.

Regardless, this might actually do some serious good. But it also won't ever scale. That fact makes it an object lesson in why this problem is so impossible to solve without a dramatic overhaul of how cities regulate land use and development.

What Corporate Clout Can Fix 

This is not a small amount of housing. Multihousing Pro puts the size of this effort into context:

Google points out that there were only 3,000 homes built in the South Bay in 2018. Assuming that the 20,000 new homes targeted by the plan in the next 10 years are built, this would increase the current rate of new home construction by 2/3, a very significant increase.

Aside from already owning a large amount of land in the area, Google is able to make such a dent for a key reason: it almost certainly has the clout to push rezoning and development approvals through the political process, in a way a more conventional developer can't, and a small-scale developer certainly can't. It has already started working with the cities of Mountain View, Sunnyvale, and San Jose on exactly this.

What Google is doing is the housing-market equivalent of taking an international flight and buying carbon offsets. You’ve mitigated your immediate contribution to worsening a systemic problem, but you haven’t changed the systemic problem in the least.

California, and the Bay Area specifically, are infamous for an absolute jungle of process you must overcome if you want to build anything—creating lots of opportunities for development opponents to stonewall projects for years. This drives up the price of development (and ultimately housing costs), not insubstantially. More importantly, it shuts a lot of would-be developers out of the market, and causes a lot of worthwhile projects to simply never even be proposed. 

Google almost certainly won't be stymied by this. But why should it take a Google to overcome the Bay Area's resistance to needed homes?

I'm a little surprised to see the company not applying more of a Silicon Valley mindset—investing in innovations that can provide a multiplier on the original investment. I can speculate as to why they aren't, though. Google might be good at funding innovations in construction techniques or materials, if it chose to, but the "innovation" that the Bay Area needs to address its housing crisis is mostly political and social.

What the Bay Area needs to do is reform regulatory processes, abandon an untenable paradigm of restricting almost all residential land for single-family homes, and allow incremental development in a broad swath of neighborhoods. It needs to make approval of such development rapid enough and predictable enough that small-scale developers can get in the game. And for this to happen, there needs to be a huge cultural and institutional shift, because right now, every one of Silicon Valley's small, fragmented cities has every incentive to build a wall of exclusionary zoning codes around itself and saddle its neighbors with the burden of housing its workforce.

Google, for very good reason, doesn't want to get in the mud here. It probably shouldn't. Google is already widely perceived as one of the villains in the whole region's housing crisis. It's a linchpin of the industry that's driving explosive job growth which hasn't been accompanied by a corresponding number of homes—not even remotely close.

Image via BIA Bay Area

The tech industry is not a credible savior for the Bay Area's housing woes. And even if five Googles decided to each chip in $1 billion and do the same thing, that's a really fragile way of solving a systemic problem. It would increase the region's already unhealthy dependence on a single industry for its inhabitants' well being, and evoke the "company towns" of yesteryear.

What Google is doing amounts to mitigation of its own impacts, as the juxtaposition of their announcement with the Curbed piece that began this article makes clear. It's the housing-market equivalent of taking an international flight and buying carbon offsets. You've offset your immediate contribution to worsening a systemic problem, but you haven't changed the systemic problem in the least.

Google Doesn't Have the Answer to This One

Google's investment is welcome. It makes business sense for them—they still need to locate employees in the Bay Area, and driving down the cost of rent will help them attract and retain people without raising salaries even higher.

But bigger, more troubling, issues remain. The biggest is that the Bay Area is a regional economy out of balance, and a symptom of a national economy out of balance. A handful of superstar cities are responsible for an ever-more-disproportionate share of America's economic dynamism, and as a result, there are huge "left behind" parts of the country that could easily accommodate housing and jobs, but where the brightest and most ambitious college grads wouldn't dream of moving.

The Bay Area is also the logical conclusion of what the Suburban Experiment has wrought when it comes to land-use planning. It's the ultimate bad party: existing homeowners have every reason to protect their investment and very little reason to want anyone new to show up. It's exacerbated by California-specific factors like Proposition 13 and a process-happy political culture that results in the kind of obstacles to even small-scale (perhaps especially small-scale) development that seem insane from the vantage point of most parts of the country.

Google can't fix these things. The kind of innovation that's needed isn't the kind Google is good at. In the meantime, I know plenty of people who struggle to pay rent there, and I'm glad Google is spending a chunk of money to make things better instead of worse.

(Cover photo: Robbie Shade via Flickr)